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Essay: Merchandise management (Sainsburys)

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  • Merchandise management (Sainsburys)
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Merchandise management relates to the activities of acquiring goods and services, and availing them at the stores in the time, prices and quantities (Nicholls, 2015). Sainsbury’s prioritises merchandise management because it determines the extent, in which the products bought by customers are consistently meeting the needs of customers whilst at the same driving up sales, quantities to stock at a particular time this comes from the possibility of shortage or overflow in stock, both shortage and overflow are very costly to business of Sainsbury stature, the display of products in the store are done in cost effective way that can maximise sales as much as possible, usually by having the more expensive usually name brands at eye level allowing customers to get a first glance at them and all other Sainsbury own brands at the bottom(See figure 1) , and price levels that can maximise profits. In addition to making sure that they meet customer needs, Sainsbury ensures that its inventory is always up to date with stock never out of stock for too long and shelf always being full this tactic used by Sainsbury as outlined on the website they work on developing a relationship with suppliers so that can face the new challenges Socially, Ethically and Environmentally. Zentes, Morschett and Schramm-Klein (2017) recommend that retailers should ensure that they handle and store all merchandise correctly to enhance ease of accessibility by customers.

Another critical aspect of merchandise management is reordering. Retailers are required to know exact time when they are required to make reorders. Sainsbury’s implemented a new solution referred to as Wesupply with the help of IBM; the solution was meant to monitor status of all orders across the company’s network in order the enhance visibility within operations (Sainsbury’s 2018b). Visibility is instrumental because it amplifies stock and makes them available to customers. Reordering is a key aspect in a big retailer such as Sainsbury as it keeps customers shopping at Sainsbury and not turning to competitiors for example the day of FIFA’s release the game always goes out of stock no matter the quanitity stores have, Sainsbury reorders to enable them to restock as fast as possible so that customers’ needs can be met.
Retailers strive to manage merchandise environment using merchandise categories. The reason for grouping merchandise into categories is to ensure that every item sold in the retail store is properly classified and structured. Varley (2014) believes that the focus of merchandise categories is customer behaviour (how they approach the purchasing process), how they arrive at the shopping store, and the needs and requirements they want to satisfy. At Sainsbury’s, product groupings are arranged into strategic business units in order to maximise sales, meet needs of consumers and achieve the desired profits. The company’s general merchandise has been expanded to clothing ranges, food counters as well as Argos and Habitat stores in the supermarket stores (Sainsbury’s, 2018b).

Sainsbury’s seeks to outdo their competitors by adopting proactive decisions that support market desires, capabilities of suppliers, costs competitors and product trends. This is because of the recognition that customer demand is not completely predictable (Gooner, Morgan & Perreault, 2011). Hence, there is need to stock a variety of products that can satisfy customers with different needs and provide a range of goods and services so that customers can satisfy all their needs under one roof without necessarily having to travel from shop to shop for particular goods and services. Sainsbury’s seeks to ensure that it remains appealing while avoiding to lose sales by being out of stock the same way it does not want to experience excess merchandise (Sainsbury’s, 2018b).
Figure 1

Retail Location

Sainsbury’s stores are located in prime areas that are conveniently accessed by customers. Sainsbury has 2,200 stores across the UK and Ireland this includes both convenience stores and Argos. Stores reach out most of the cities and towns within the UK and certain region’s in N.Ireland.

Sainsbury’s believes that convenience, speed, and flexibility are key aspects of success in the modern retail environment (Sainsbury’s, 2018). The recent opening of a Local sore in Trumpington Meadows on August 24, 2018 was meant to enable local residents access a wide range of products including fresh fruit and vegetables, bakery products, snacks, and sandwiches as well as other convenience products between 7:30 am and 10 pm (Sainsbury’s, 2018). This new Sainsbury stores offers over 25 new jobs to the local people, whilst doing this it creates a bigger platform on which Sainsbury can continue to reach out to its community by providing support to charities and local programs, Sainsbury has set out an aim to help it local communities by raising over 400M by 2020 (Sainsbury, 2018)

Sainsbury’s relocated its Shop Support Centre from Holborn to Kings Cross in 2011 (Reuters, 2018). The aim of this was to increase savings from operational costs and energy efficiency by occupying a new complex in Kings Cross. Having identified a large market gap in Northern Ireland, Sainsbury’s increased the number of shops located in Northern Ireland to eleven in order to increase the number of customers served. Part of the plan included purchasing two Curley’s Supermarkets in Dungannon and Belfast (The Irish Times, 2008).

Sainsbury’s increased the number of groceries Click and Collect points as well as online fulfilment location was meant to enhance service to its online delivery network (Emma, 2018). These included opening a dark store in Bromley, London area. The expansion and increasing stores has been instrumental in extending the retailer’s delivery network and integrating concessions in shops including Argos, Habitat, and Timpson’s. Based on information displayed in Sainsbury’s (2018), the company has more than 800 stores, about 600 supermarkets, 800 Argos stores and £11 billion in property assets. .

Retail Space

Retail space relates to the atmosphere of the retail store. Research has consistently revealed that the atmosphere in which shopping takes has a significant influence in consumer behaviour (Lu et al., 2015). This is why Sainsbury’s strives to create a shopping environment that provides a pleasant environment for customers to enjoy their shopping.

Sainsbury’s seeks to create memories in the minds of customers from the time they step in the shopping halls till the time they leave. One key area that Sainsbury’s focuses on is creation of threshold areas, which acts as a decompression zone (Sainsbury’s, 2018). This transition zone offers a feeling of relaxation once customers set foot in the store. The zone of compression enhances a nostalgic feeling, which is critical in inspiring repurchase intention (Lu et al., 2015). Sainsbury’s chooses products that are more eye-catching and prestigious to make customers develop a feeling of luxuriousness. Sainsbury uses wide and long isle that provide customers with more of a variety than one can actually expect, these long and wide isle are designed to allow customers to take their time and appreciate the variety they can pick from whilst also allowing more than a few shoppers in the same area at once.

Given the limited space in stores, Sainsbury’s enter into concessions with partners to discuss ways of best providing customers with more product choices within the space available (Sainsbury’s 2018b). In 2015, Sainsbury’s planned to convert shop space equivalent to about forty supermarkets into non-food products (Ruddick, 2015). The aim of this was to respond to decline in grocery sales. About 1.5 metre square fit space was identified across the United Kingdom, representing 6% of its portfolio (Telegraph, 2015). The company identified that the space was no longer needed because customers were rapidly switching spending to convenience stores, online and discounters. After using half of the space for self-branded products such as homeware and other kitchen items, the other spaces would be sublet to other businesses seeking to operate within the supermarket retail space, for example Jessops the photography company has some concessions in Sainsbury like the one located in Abbey Wood(Sainsbury, 2018). Liu et al. (2018) outlined that space in abundance provides a great shopping environment.

Target Market and Customers

A target market is defined as a broader group of potential customers, who are defined by ranges (Powers and Loyka, 2010). The target market for Sainsbury’s comprises of people of all ages, gender, and race residing in the United Kingdom. The UK residents are the most likely group to purchase from Sainsbury’s from both physical stores and online ordering. However, for the purposes of the need to break down a target market into specific target customer (Nicolls, 2015), Sainsbury’s has identified its target customers for purposes of customising its marketing efforts. Lu et al. (2015) defines a target customer as a person who is most likely to purchase a product offered by a business. For example, the reason for reducing food products and stocking non-food products was gathered by an observation that the company’s customers were starting to shop more in convenience stores. The company has segmented its target customers based on demographics (Sainsbury’s, 2018). Demographic segmentation puts into consideration aspects such as age, income, level of education, religion, nationality, family size, gender, and occupation. through proper segmentation of customers, Sainsbury’s has made significant improvements in customer service, increased volumes of sales, and concentrating resources on only segments that are more profitable than others. Between the top four biggest supermarkets its Sainsbury that people associate with quality, Sainsbury has since noticed this and has gone to charge premium prices. Sainsbury segmentation allows them to still be available for a wide range of customers while pleasing customers with quality they charge reasonable premium prices.

(Sainsbury’s, 2018) shows that Sainsbury has over 90,000 products available for customers to pick from, this is due to the fact that Sainsbury wants to diversify its diverse outreach to reach even further than any of their competitors. Customers’ lives are changing with tastes, preferences and fashions. The company is also responding to customer dynamics proactively by constantly adjusting to the needs of the changing environment and needs of customers (Sainsbury 2018). (Lu et al. 2015) states that failure to adjust in time when customer tastes and preferences change is detrimental to success of retail. Sainsbury responds to this by continuously meeting the needs of the changing environment, for example Sainsbury Woolwich offers a larger Halal option in 2018 than it would have in 2009 because of the growing Islamic population.

Sainsbury mainly targets families (Sainsbury’s, 2018). Although all types of customers are catered for in the company’s product offerings, Sainsbury’s seems to emphasise more in the family needs. Given the high price sensitivity levels that characterise customers, Sainsbury’s ensures that products are offered in prices that are price-friendly to ensure affordability. To increase affordability, the company has streamlined its supply chain processes in addition to sourcing from the most economical suppliers in order to minimise costs of purchase, which eventually allows the company to set favourable prices once products arrive at the shelves.

Lu et al. (2015) hypothesized that the only way through which retail organisations can succeed in satisfying the needs of customers is by developing an accurate understanding of their needs and requirements. Sainsbury ensures that it hires only the best in order to keep customers happy with excellent customer service. Other areas of consideration include knowledge of the products, quality of facilities, and the promptness with which changing needs are addressed.

The sustainability of Sainsbury’s provides vital evidence of the organzations commitment to meeting and excelling the expectations of customers. Support to communities has seen Sainsbury aim to raise over 400M by 2020, 33,350 schools across the UK and clubs participating in Sainsbury’s Active Kids scheme in 2017/2018 (Sainsbury, 2018)

Customer Communications

Yoo, Donthu and Lee (2000), states that the marketing mix involves four elements (for goods) and three extra elements for services. These elements are product, promotion, price, placement, physical evidence, process and people. Sainsbury usually communicates with its customers through “promotion”. Promotion is divided into six elements; advertising, personal selling, sales promotions, public relations, publicity and direct selling (TheMarketingMix, 2016). The aim of communication is to transmit product messages of the retailing store, goods/services available, and prices and promotions being offered. Sainsbury’s uses a variety of communication tools such posters at the entrance, vouchers, displays in stores, and shelf toppers.

Sales promotions is used to cause an immediate impact on prices, hence, influencing their purchasing behaviour (Powers and Loyka, 2010). Sainsbury’s applies price promotions regularly to attract customers, Sainsburys cut prices and estimated families will save £4.95 weekly (Sainsbury 2018). However the issue with low prices is that people usually associate it with low quality. Sainsbury will change the price of products with a price elasticity, these products are prone to increase in demand when price drops and vice versa. Veblen goods may not be readily discounted because an increase in price will result in an increase in demand, these are usually Alcohols such as Wines. This implies that if their prices are decreased, consumers may develop a perception that quality has decreased because they are meant for purposes of ostentation. Advertising seeks to use mass media with the aim of reaching and enticing people who are likely to demand for a company’s goods and services, as well as informing customers about discounts and promotions available, advertising is not just aimed at regular customers but is used to draw people away from competitors and into the Sainsbury stores.

In addition to verbal communications, Sachdeva and Goel (2015) argues that the first impression customers experience when they approach the store gives shoppers an experience that determines whether they will come back or not. This is further backed by Lu et al. (2015) that “the mood, feelings and intensity of emotions associated with the moments of shopping determine the extent to which shoppers remembers the about the actual shopping experience”. Among the first impressions that Sainsbury’s has ensured to create memories in customers include the logo and the name of the company that is displayed on the entrance upon arrival, usage of vibrant colours and a large font attracts the customers eye and gives the shop a more positive feeling for customer (Figure 2). First impression is how a customer feels at the very beginning aka first opinion

A study by Lu et al. (2015) affirmed that the nostalgic atmosphere influences the experiential levels of consumers, thus, leading to differing levels of repurchase intention among the shops with high, medium and low levels of nostalgic atmosphere. Customers are the heart of Sainsbury’s business and the company’s success and future growth is founded on its ability to anticipate and deliver the needs and requirements of customers, by having a good balance of communication Sainsbury can always be sure to be ahead of customers’ needs and preferences. (Sainsbury’s,2018).

Sainsbury uses social media as a platform to communicate with its customers through different channels; Facebook, Twitter and YouTube etc the increasing use of social media makes it easier for Sainsbury to deal with queries and communicate with customers much easier(Fig 3), this is a more effective method of reaching out to customers and hearing customers voices with low costs and an increasing use of technology both parties benefit. Sainsbury has follower base of more than 1.6 million (Facebook).
Fig 3

Sainsbury has a very interesting website that has a good use of colour and imagery, the website uses a moving banner that changes all the time with important offers and promotions that Sainsbury wants customers to take advantage of as soon as they see it. The website is easily accessible to anyone with access to internet services, with options for people to communicate their opinion or query the old fashion method whilst also providing faster and easier methods to contact by providing links to the social media accounts. The social media accounts are not only just for Sainsbury and customers to communicate but for them to continue to bond and create a growing relationship outside the business world by regularly interacting with the social media world.

Approach to managing a retail business & Modes of Operations

Berman (2012) illustrates “Managing a retail organisation comprises of three steps: setting up an organisations hierarchical structure, hiring and managing personnel, and managing operations financially and non-financially. Sainsbury has a led by a senior management consisting of a Chairman, CEO and other C-suite executives, who provide goals and strategies in the method of which Sainsbury can continue to grow in the long term and continue improving. Through their excellent management of the retail, the management team endeavours to coordinate, control and plan retailing activities in such a way that they prioritise the best interests of stakeholders such as customers, shareholders, employees and the community (Sainsbury’s, 2018). This is backed by Majukwa and Haddud (2016) that retail management should be executed in an integrated manner and efforts directed towards meeting stakeholder expectations.

Between January and April 2016, Sainsbury’s engaged in talks with Home Retail Group and by September 2016 Sainsbury’s acquired Home Retail Group at £1.4 billion (The Guardian, 2016). After completing the takeover transaction with Home Retail Group, the management of Sainsbury’s split the company into three new divisions including Sainsbury’s, Sainsbury’s Bank, and Sainsbury’s Argos (Porat et al., 2018). During 2016 and 2017, Sainsbury’s continued to explore widespread expansion of the multi-channel strategy. This saw an increase in the number of groceries Click and Collect points and online fulfilment locations (Sarah, 2016). To implement this online same-day delivery, Sainsbury’s hired 900 staff who were tasked with the responsibility for deliveries from 30 stores in London (Sarah, 2016). Although the strategy was viewed as part of a reaction towards Amazon’s assault on supermarkets (Cuthbertson, Furseth and Ezell, 2015), Sainsbury’s might have responded to customers’ demand for convenience and access to products using digital platforms, which is a trend in the 21st century.

Cost-cutting is critical because it enables companies to save on operation expenses for purposes of re-investing or properly managing their cash flow (Oxford Economics, 2014). Sainsbury’s its intention to cut operational costs and save £500 million of costs (Marlow and Armstrong, 2017). By March 2017, the company had cut down 400 jobs. A total of 4,000 jobs underwent reorganisation (Emma, 2018). This affected employees in the nightshift and employees operating in the roles of commerce such as cash office and price control. Emma (2018) further reveals that Sainsbury’s overhauled shop management structures. These resulted in thousands of job losses. During the month of October 2017, Sainsbury’s axed human resource department employees including human resource managers, payroll clerks, learning and development managers, and clerks. These in overall affected 1,400 positions at the time when another 600 jobs were cut at the head offices (Chandler, 2017).

“Human Resources is such an important part of Sainsbury’s” (Sainsbury 2018) The main areas of focus of human resource management include recruitment, selection, training, compensation, supervision and motivation. As part of the company’s human resource management strategy, Sainsbury’s increased the base rate of pay of its staff (Reuters, 2018). This was aimed at retaining the best workers. One of the visions of Sainsbury’s is to be the most trusted retailer where people love to work (Sainsbury 2018). More than 13,000 colleagues have worked with Sainsbury’s about 20 years (Sainsbury’s 2018). Currently, Sainsbury’s has employed over 195,000 people sourced from more than 70 different countries (Sainsbury’s, 2018). Diversity management has been key in the company’s strategic human resource management practice to ensure that all employees fit in regardless of their gender, race, ethnicity, language and religion. To achieve its vision of being the most inclusive retailer, Sainsbury’s provides employment opportunities for disabled people through the program dubbed You Can, which seeks to enable employment opportunities for people who may be facing barriers to employment. Sainsbury’s has paired more than 2,000 female colleagues with mentors to make them more reliable in delivering excellent customer service (Sainsbury’s, 2018c). The company works hard to keep employees happy and motivated. Thus, human resource management in Sainsbury’s involve investment in employees and prioritising them in strategic plans of the business.

Operations management is the highest form of efficiency in an organisation (Investopedia 2018) Operations management integrate essential resources necessary to ensure actualising strategies of the company. In Sainsbury’s, operations management focuses on ensuring that the quality objective, speed objective, and flexibility objective area achieved during a customer’s buying process. Sainsbury’s ran a campaign referred to as Making Sainsbury’s Great Again between 2004 and 2006 (Marlow and Armstrong, 2017). This was an operation strategy that was meant to achieve the company’s recovery from declining performance of the period prior to 2004.

Finance management is at the heart of retail business as this is where budgets are set and money is managed. This is evidenced by the management’s commitment towards ensuring that profits are properly planned for, assets are well managed to minimise depreciation, and costs are regulated. Sainsbury’s has a budgeting team that is experienced across all aspects of the company such that they can plan for all functions of the company without misusing finances. Cost-saving has been the main strategy of survival and profitability.

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